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PBOC Cuts Reserve Requirement By 0.5%, Joins 15 Other Central Banks Easing In 2015
Moments ago the number of central banks who have eased so far in 2015, most of them unexpeted, rose by one more from 15 to 16, when in addition to Singapore, Europe, Switzerland, Denmark, Canada, India, Turkey, Egypt, Romania, Peru, Albania, Uzbekistan and Pakistan, Russia and, most recently, Australia it was China's turn to do what so many banks had said was inevitable, even if meant backtracking on all its blustery talk about limiting bad debt expansion, and cut its reserve requirement ratio for bank by 0.5% effective Thursday, to boost liquidity and support the economy.
The full statement, google translated:
People's Bank of China decided to cut financial institutions RMB deposit reserve ratio by 0.5 percentage points since February 5, 2015. Meanwhile, to further enhance the ability of financial institutions to support structural adjustment, increase small and micro enterprises, "three rural" and support the construction of major water projects, small and micro business loans accounted for directional drop quasi standard of urban commercial banks, additional non-county rural commercial banks decreased by RMB deposit reserve ratio by 0.5 percentage points, the Agricultural Development Bank of China to reduce extra RMB deposit reserve ratio by 4 percentage points.
People's Bank of China will continue to implement a prudent monetary policy, maintain an appropriate degree, guiding monetary credit and social financing scale steady moderate growth, and promote the smooth operation of economic health.
Following the rate cut, China's RRR drops from 20% to 19.5%, and one has to wonder just how bad things are at China's Agri Bank if it has to be "stigmatized" by the central bank, i.e., explicitly noted that it needs more liquidity than all its peers, with an additional rate cut.
Some initial reactions, via BBG:
Chinese stocks, bonds and commodities will rally on Thursday after the central bank’s “surprise” cut in reserve-requirement ratios, while the yuan will come under pressure and may require intervention, according to Hao Hong, head of China research at Bocom International in Hong Kong. “We should see an sizable lift in stocks, bonds, and to a certain extent, commodities,” Hong said. “Some pressure will be on the yuan although the PboC will intervene." For rest of 2015, monetary loosening will be the theme though it could be less than what the market wants.
Another:
"Rather than get caught flat-footed as Chinese policy makers were in 2014 as economic data collapsed, 2015 will see a much more aggressive PBOC and government, which should keep CNY support,” Peter Rosenstreich, head of market strategy at Swissquote Bank, writes in note.
PBOC’s decision to cut RRR likely prompted by weak Jan. HSBC Services PMI: Swissquote; says move will be positive for regional FX and commodity prices
A third take sees the RRR-cut not as a stimulus as much as an attempt to offset the recent liquidity outflows:
People’s Bank of China decision to cut RRR by 0.5 percentage points today “should be seen as a liquidity management tool rather than a stimulus,” Andrew Polk, Beijing- based economist with the Conference Board, says in an e-mail.
Monetary policy through this year likely to see “strange mix of liquidity support and an attempt to lower financing rates for SOES and local governments,” Polk says. "This combination of lower supply of liquidity from capital outflows and higher liquidity demand from the Chinese New Year likely led the central bank not to take any chances as far as reliving a liquidity crunch like in June 2013."
The market response was quick, with all risk assets rising, if not as much as some had hoped, and for once, gold did not suffer a slamdown on the news that yet one more bank is injecting even more liquidity into the market. We expect the SHCOMP to surge to new highs in tonight's trading session, which having become a clear bubble will present a fresh challenge to the PBOC because while it wants to support its banks it does not necessarilt want to overinflate the equity bubble, which as we have commented previously, is where all the housing bubble addict have migrated to ever since China's housing bubble burst.
Finally, as BBG noted:
- OFFSHORE YUAN ERASES GAINS TO 6.2588 VS USD AS PBOC CUTS RRR
This too will be frowned upon by the Central Bank, considering the number of voices that have emerged in the past few weeks calling a Chinese devaluation (see for example "As China's Offshore Yuan Crashes To A 2 Year Low, Beijing Warns Its Citizens: "Don't Buy Dollars"") may be on deck, and the PBOC stern attempt to refute them all.
Naturally, once this latest quantized attempt to boost the economy fails, those same voices will merely reassert that the only way China can truly return to export competitiveness in light of the soaring dollar to which it is pegged, is to proceed with a wholesale currency devaluation. Stay tuned.
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Deflate away, Mr. Chan. The cliff edge is broad indeed, fully capable of handling an additional 1.3 billion jumpers.
Soooo.... Bullish?
Well that explains the 400 point slam higher for the Hang Seng Index in just a matter of minutes
Yet we all know that easing doesn't work, so don't be surprised when it don't work, don't get exhausted trying to make it work, for we all know the moment it failed.
Easing doesnt work? Work at what.... they are trying to achieve more lending by reducing reserve ratios. This is China, if the Central Bank of China says lend they will lend.
The borrowers will use that money to buy stocks and the a wealth effect will occur.... its a win win win situation - until its not.... (when they raise ratios)
OKAY Booker T, keep juggling the #'s knowing anything over 10% to the public is ILLEGAL.
they never planned on QE "working". it appears that their plan is to shift a massive amount of wealth to Asia and that seems to be working
Currency wars started, they have ~ Yoda
they will deny it all the way but a devaluation is inevitable.
Just 0.5% ... soft. I expected more from China.
So far (and we must still pass the test of the 8 -8:30am ET smack down), gold is holding the $1,256/oz floor. If oil proves it can remain above the lows of $43/bl and treasuries have also tested the lowest yields....then we are seeing the green light, the beginning of the next phase in this crisis.
Confundido
Help me, help me. What do I do? Sell the farm, use all my CC balance to buy what?... Treasuries
The more I read about the economic situation of the world, the more I get worried. Normally, I would have thought that there would be a "safe haven" to invest in. But the more I read about China loosening reserve requirements, inflating credit bubble and providing $8 billion extra liquidity to their banks (bet you didn't hear about that one!) and so on, the more I think China is just as much an economic basket case as the rest of the world. Singapore is ripe for a fall, Hong Kong is teetering and Japan is...well...Japan.
Apart of gold, silver and a few commodities, there's nowhere to hide. I don't mean to sound like a Chicken Little, but I REALLY want someone to prove me wrong. This is all going to hit hard. I hope all the Zero Hedgers have prepared themselves.
The only saving grace I can get out of this is that, if my investments pay off, I can live comfortably while thumbing my nose as all those failed bankers and MBA-having-mofos.
It's the small things, that make life worth living.... ;O)
china is a complete clusterfuck just like everywhere else. but they have been very busy buying massive amounts of gold and all sorts of mines and oil and real estate all over canada and usa and europe and australia. when we print money we use it to buy their cheap shit. when they print money (and spend the USD we've been funneling to them) they buy hard assets with a long term view. might not be perfect but id say it's better than the US et al.
You are fearing a unlikely scenario.
We all know that the risks of conducting such policies is going to put the global economy in a difficult situation at some point. Its an unlikely scenario because the bankers and MBA's you mention, they are much smarter than you and I, and they went to school for long periods of time, passed exams in risk managment, and manage more risk on a daily basis than you or I. Zero Hedge isn't an exclusive service, they too read the articles of doom and gloom and they too understand the risks and they will figure out ways to soften the blow or avoid it altogether.
Nowhere to hide? Hide from what? Devaluation of the currency - buy stocks. They are going up and the central bankers are making sure that they go up. And then one day... that one day that all the Zero Hedgers are waiting for, apocolypse, then you can buy Gold and Silver. till then chill out and enjoy those little things that make life worth living.
GL
This is why China needs growth....their appetite is simply too big. China's banks continue to grow rapidly outside China.
ICBC bank first bought a US bank in 2012-Bank of East Asia. Then Fosun bought JP Morgan HQ in 2013. Then ICBC bought 20% stake in S. Africa's Standard Bank in order to expand in Africa.
In Dec 2014, China's Haitong Securities bought the entire Investment bank unit of bankrupt Espirito Santo in Portugal for USD 500m & gained a foothold in EU & few days ago ICBC, the world's No. 1 bank by assets, employees, profits, branches & capital, paid USD 690m & took a majority stake in a bank in London.
China's Biggest Bank Buys Controlling Stake in Standard Bank's UK Business
Read more: http://sputniknews.com/business/20150202/1017667640.html#ixzz3Qm7K5xC8
While US, EU and Swiss banks keep imploding or shutting down or leaving other countries or keep raising capital trying just to survive and dodge Basel regulations and survive stress tests or get bailed out or be nationalised......with stock prices of US, EU and UK banks at multi decade lows, they are simply a D I S A S T E R!
When was the last time anyone heard of any acquisitions by a US, EU, UK or a Swiss bank?
The contrast is quite stark. You never hear of fines, penalties, capital raisings, shut downs from Chinese banks or entities. On the contrary you hear just the exact opposite: Chinese companies are growing, not paying any fines or penalties, making massive acquisitions very quietly and instead of shutting down are expanding at a very rapid pace.
China also has a major need to get out of US Treasuries which is why buying real businesses and properties make a lot more sense.
By reducing interest rates just like others, China is just keeping the playing field equal and should make more acquisitions in the months ahead as it continues to keep up with its appetite.
London's FTSE 100 index unable to move into positive territory despite being composed primarily of large cap commodity stocks.
That long term triple peak overhead resistance:
http://www.clivemaund.com/charts/ftsselongterm290115.jpg
OK, Ok... So, but which one of these Sweet Sixteen central banks is going to be the next to pull a Little Switzerland and make things really juicy in this global game of chicken by being next to jump off the runaway train and breaking their legs? Things are quickening but the shit is still not real enough yet.
Watching all these politicians and central bankers just twist around for 6 years has been more painful than trying to watch a 4 hour British movie. No offense Brits.
No offence taken.
I realise plot and structure in a film can be painful for Americans..... ;O)
(Just joking, people!)
That was a painfully long movie, and their queen still dies toward the end.
Another monetary easing by a central bank. These surprises just keep coming, don't they.
Didn't it used to be called 'pushing on a string'? Globally.
GLTB
Chinese stocks, bonds and commodities will rally on Thursday.
We actually had that yesterday because it was leaked to the investment banks and they've already made their killing.
This is all "positioning" now. US, Russia, China, et. al. are trying to position themselves in such a way that they come out of the shithole on top. It's not who falls first, it's who can stand up first after the implosion.....that'll be the winner. I'm not making any bets yet on who that'll be. IMHO US has the lowest probability of a quick recovery.
I'm making over $7k a month working part time. I kept hearing other people tell me how much money they can make online so I decided to look into it. Well, it was all true and has totally changed my life. This is what I do... http://goo.gl/ezLA00
"Moar, moar, moar, how do you like it, how do you like it". Come on uncle Janet everyone is doing it, just a little moar. Its obvious that 6 years hasn't be long enough, we just need a little moar time. Come on Janet just sing along with me. It goes like this. "I think I'm turning Japanese, I think I'm turning Japanese, I really think so".
Bullard says break up the Big Banks. Next thing you'll know he'll be talking about auditing the FED. Shirley he jests, he's taking this bad cop thing way to literally, and please don't call him Shirley.